You may have seen how China’s DeepSeek AI shocked the American stock market and political landscapes on January 27th. Why did this happen? What is behind it? What could this event mean? Let’s find out.
The political aspect of DeepSeek’s rise
The meteoric rise of DeepSeek, a Chinese artificial intelligence app, has sparked significant reactions across the tech and political landscapes in the United States. On Monday, President Donald Trump called the app’s sudden popularity “a wake-up call” for American tech companies, emphasizing the need to remain competitive in the rapidly evolving AI sector.
DeepSeek, a low-cost AI assistant, soared to the top of Apple’s app store rankings over the weekend, outperforming many established AI models from U.S. tech giants like Meta and OpenAI. This achievement has unsettled U.S. markets, as the app demonstrated strong performance despite being developed at a fraction of the cost of its American counterparts. Addressing the situation during a trip to Florida, Trump remarked, “The release of DeepSeek AI from a Chinese company should be a wake-up call for our industries that we need to be laser-focused on competing.”
What do DeepSeek and TikTok have in common?
While Trump acknowledged the competitiveness of DeepSeek, he also viewed its low-cost development as a potential advantage for the industry as a whole, suggesting that reduced spending could still yield high-quality solutions. However, DeepSeek’s rise has added to growing concerns about the dominance of Chinese apps in the U.S. market. This trend follows the popularity of other Chinese platforms like RedNote and Lemon8, which gained traction as alternatives to TikTok during discussions about banning the latter over its Chinese ownership.
TikTok, though temporarily unavailable for new downloads, remains a contentious issue in the U.S., with security experts raising alarms about potential privacy risks linked to Chinese apps. These concerns extend to DeepSeek, particularly after reports surfaced that the app censors sensitive topics, such as the Tiananmen Square massacre. Rep. John Moolenaar, chair of the House Select Committee on China, accused DeepSeek of being controlled by the Chinese Communist Party (CCP) and erasing the CCP’s history of oppression. He urged for stricter export controls on technologies critical to DeepSeek’s development, highlighting the national security risks posed by such apps.
DeepSeek reveals export control issues
DeepSeek’s developers claim to have created the app despite existing U.S. export controls on high-performance semiconductors. This has fueled debates about the effectiveness of these controls. Sen. Mark Warner defended the current regulations but acknowledged that additional measures might be necessary. “While export controls have had an impact, they alone will not stymie China’s AI ambitions,” he stated, pointing out that advanced chips remain essential to DeepSeek’s success.
House Speaker Mike Johnson echoed concerns about China’s AI advancements, describing DeepSeek as a “serious threat” to the U.S. economy and national security. He criticized China’s history of intellectual property theft and emphasized the need for a strong response. Meanwhile, David Sacks, Trump’s White House AI and cryptocurrency advisor, highlighted the competitive nature of the AI race. He pointed out that previous policies under the Biden administration had “hamstrung” American AI companies, but he expressed confidence in the U.S. maintaining its leadership with the right approach.
Investors are also in danger
DeepSeek’s rapid ascent has also sent shockwaves through financial markets. On Monday, U.S. tech giant Nvidia saw its stock value plummet by nearly 17%, with other AI-related firms, including Microsoft and Google’s parent company Alphabet, also experiencing sharp declines.
European tech markets were similarly affected, with Dutch chipmaker ASML and Siemens Energy suffering significant losses. Analysts have suggested that the emergence of a low-cost Chinese AI model caught the market off guard, raising concerns about the profitability of U.S. firms heavily invested in expensive AI infrastructure.
The rise of DeepSeek suddenly showed China’s advantage
DeepSeek’s affordability stems from its innovative approach. The app is powered by the open-source DeepSeek-V3 model, reportedly trained for just $6 million—a stark contrast to the billions spent by competitors. DeepSeek’s developers utilized existing technologies and open-source software, which can be freely modified and distributed. This model, coupled with cost-saving measures, challenges traditional assumptions about the financial requirements for AI development.
The app’s emergence has drawn comparisons to historic moments of technological rivalry. Silicon Valley venture capitalist and Trump adviser Marc Andreessen likened DeepSeek’s debut to “AI’s Sputnik moment,” referencing the Soviet Union’s launch of the Sputnik satellite in 1957, which had caught the U.S. off guard. Similarly, DeepSeek’s success has highlighted the adaptability of Chinese developers in overcoming restrictions on advanced chip imports by sharing resources and adopting new techniques.
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In a related development, DeepSeek’s creators announced on Monday that they would temporarily limit registrations due to “large-scale malicious attacks” on their software. The company reassured existing users that they could continue accessing the app while efforts to address the attacks were underway.
What do we know about the founder of DeepSeek?
DeepSeek’s founder, Liang Wenfeng, has played a pivotal role in the app’s success. The 40-year-old graduate of information and electronic engineering also founded the hedge fund that backed DeepSeek. Reports indicate that Liang stockpiled Nvidia A100 chips before export restrictions took effect, pairing them with lower-end, importable alternatives to power the app’s development. Liang’s resourcefulness underscores the broader implications of DeepSeek’s rise for the global AI landscape.
What will the U.S. government do with DeepSeek?
As the U.S. grapples with the implications of DeepSeek’s ascent, it faces a dual challenge: safeguarding national security while fostering innovation to maintain its leadership in AI. The coming months will reveal how policymakers and industry leaders navigate this delicate balance in an increasingly competitive global environment.